The Standard & Poor’s 500 Index (SPX) fell, capping the biggest decline in about a month, as the euro tumbled after Spain said the recession will extend into next year and concern about its regional governments’ finances grew.
Bank of America Corp. (BAC:US) and JPMorgan Chase & Co. (JPM:US) dropped at least 1.6 percent, amid a plunge in European lenders, as Spain’s bond yields rose to a euro-era record. Raw material shares in the S&P 500 fell on news China won’t relax property control policies, intensifying concern an economic slowdown could reduce demand for commodities. Restaurant shares tumbled as Chipotle Mexican Grill Inc. (CMG:US) plunged 22 percent on disappointing sales.
The S&P 500 lost 1 percent to 1,362.66 at 4 p.m. New York time. It rose 1.7 percent over the previous three days. The Dow Jones Industrial Average fell 120.79 points, or 0.9 percent, to 12,822.57. The euro weakened to the lowest versus the yen since November 2000. Volume for exchange-listed stocks in the U.S. was 6.8 billion shares, about in line with the three-month average.
“The problem is everywhere,” said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York. “Once the disease starts, it seems hard to stop and you wonder whether the euro will survive. There’s also concern about China’s statement because their actions have been more supportive of asset prices.”
Global equities fell in a vote of no-confidence to European authorities after the final approval of a bailout of Spanish banks. Valencia, the second-most indebted region, said it would tap an emergency-loan fund. Italy’s Prime Minister Mario Monti blamed unrest in Spain for surging borrowing costs.
“The problem hasn’t gone away and the unnerving part is that it’s deepening,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private- banking unit of KeyCorp in Cleveland. “The Spanish ghost is rising again. It’s not only the banks. The regional governments also need help. Things are not better yet.”
Concern about a global slowdown also grew today as China will seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices, Xinhua News Agency reported. The Morgan Stanley (MS:US) Cyclical Index, which tracks companies most-dependent on economic growth, slid 1.7 percent.
Expectations for stimulus measures and better-than- estimated profits still gave the S&P 500 its second straight weekly gain. Earnings have exceeded analysts’ forecasts at 73 percent of the 118 S&P 500 companies that have reported quarterly results, according to data compiled by Bloomberg.
Financial shares dropped the most among 10 S&P 500 groups, declining 1.5 percent. Bank of America lost 2.6 percent to $7.07. JPMorgan fell 1.6 percent to $33.90.
Wall Street’s five biggest banks reported the worst start to a year since 2008. JPMorgan, Bank of America, Citigroup Inc. (C:US), Goldman Sachs Group Inc. (GS:US) and Morgan Stanley had combined first- half revenue of $161 billion, down 4.5 percent from 2011 and the lowest since $135 billion four years ago.
Raw material shares also slumped as a rally in the U.S. dollar reduced the appeal of commodities. The S&P GSCI gauge of commodities slid 0.4 percent. Freeport-McMoRan Copper & Gold Inc. (FCX:US), the biggest publicly traded copper producer, retreated 1.9 percent to $33.77.
All 24 stocks in the S&P Supercomposite Restaurants Index retreated. Chipotle Mexican tumbled 22 percent, the most since its initial public offering in 2006, to $316.98. The best- performing restaurant (S15REST) stock in the S&P 500 last year reported second-quarter sales that trailed analysts’ estimates.
Xerox Corp. (XRX:US) slumped 6.8 percent to $6.70. The provider of printers and business services cut its full-year profit forecast as the economic slump in Europe crimped demand for technology.
Advanced Micro Devices Inc. (AMD:US) tumbled 13 percent to $4.22, the lowest price since 2009. The maker of processors for personal computers predicted a revenue (AMD:US) decline as a sluggish economy curbs PC sales.
Freescale Semiconductor Ltd. lost 6.5 percent to $9.55. The maker of semiconductor processors forecast third-quarter revenue that missed analysts’ estimates.
Avon Products Inc. (AVP:US) slipped 5.3 percent to $15.73 as investors reacted to an announcement that general counsel Kim Rucker plans to leave the company for another post.
SanDisk Corp. (SNDK:US) rallied 10 percent, the most since May 2010, to $38.70. The shares also had the biggest gain in the S&P 500. The maker of flash memory for mobile devices reported second- quarter profit that topped (SNDK:US) analysts’ estimates.
Google Inc. (GOOG:US) advanced 3 percent to $610.82. The owner of the most popular search engine said second-quarter revenue surged 35 percent, helped by its acquisition (GOOG:US) of Motorola Mobility Holdings and as more users clicked on advertisements.
Energy shares in the S&P 500 rose even as oil dropped for the first time in eight days. Natural gas futures closed above $3 for the first time in six months.
Schlumberger Ltd. (SLB:US) added 1 percent to $69.33. The world’s largest oilfield-services provider said second-quarter profit (SLB:US) rose as customers increased their quest for crude outside the U.S. and Canada onshore market.
General Electric Co. (GE:US) rose 0.4 percent to $19.87. Earnings climbed 7 percent in the second quarter after profit growth at the finance and energy units overcame a drop in wind-turbine orders. Revenue rose 2 percent to $36.5 billion, trailing analysts’ estimates of $36.8 billion.
A measure of homebuilders in S&P indexes jumped 2.6 percent. PulteGroup Inc. (PHM:US) rallied 3.7 percent to $10.86. D.R. Horton Inc. added 2.2 percent to $18.88.
Palo Alto Networks Inc. (PANW:US) and Kayak (KYAK:US) Software Corp. jumped in their trading debuts after raising more than planned in initial public offerings, bolstering the revival in technology IPOs. Palo Alto, a provider of Internet-firewall technology, climbed 27 percent to $53.13, while Kayak, the travel-site operator, rose 28 percent to $33.18.
Onyx Pharmaceuticals Inc. (ONXX:US) increased 12 percent to $76.38 as a treatment for a deadly blood cancer won U.S. approval, giving the company its first wholly owned drug to sell.
The cost of protecting against U.S. equity losses is dropping at the fastest rate in more than three years, pushed lower by speculation the Federal Reserve will stimulate the economy as concern about Europe recedes.
Puts with an exercise level 10 percent below the S&P 500 cost 8.73 points more than calls 10 percent above on July 18, the lowest since May 2011, according to data on three-month contracts compiled by Bloomberg. The price relationship known as skew shrunk 32 percent since its June 15 high, the biggest decline since March 2009 over comparable periods.
U.S. shares jumped in the past month as optimism grew that European leaders would be able to contain the region’s crisis and investors speculated the Fed will increase stimulus measures. Fed Chairman Ben S. Bernanke this week told senators the central bank is prepared to act to boost growth if the labor market doesn’t improve.
“The acute concern about Europe’s debt crisis has faded somewhat, and markets have become a bit more complacent,” Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., which has more than $120 billion in client assets, said yesterday in a phone interview. “The market has moved very quickly to now speculate about the next round of monetary easing, anticipating some kind of policy response.”
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